FTX lied about having an insurance fund for customers
According to FTX co-founder Gary Wang's testimony, the exchange's $100 million insurance fund in FTT tokens was fake. The insurance fund was promoted by FTX as a means of protecting users' losses. Its value was calculated by multiplying the daily trading volume of the FTT token by a random number close to 7,500. In 2021, a trader was able to take advantage of a bug in the FTX system and take too large a position in MobileCoin, resulting in hundreds of millions of dollars in losses to the exchange. Since there was no money in the fund, all losses were shifted to Alameda.
According to FTX co-founder Gary Wang's testimony, the exchange's $100 million insurance fund in FTT tokens was fake. The insurance fund was promoted by FTX as a means of protecting users' losses. Its value was calculated by multiplying the daily trading volume of the FTT token by a random number close to 7,500. In 2021, a trader was able to take advantage of a bug in the FTX system and take too large a position in MobileCoin, resulting in hundreds of millions of dollars in losses to the exchange. Since there was no money in the fund, all losses were shifted to Alameda.
